Monday, December 31, 2012

Sunday, December 30, 2012

Paul Krugman wrote a piece in The New York Times recently noting that U.S. national economic forecasts usually are based on the assumptions that recent trends in productivity increases will continue and that recent trends in increasing inequality in the distribution of income will be ameliorated. "Yet this conventional wisdom is very likely to be wrong on one or both dimensions."

Recently, Robert Gordon of Northwestern University created a stir by arguing that economic growth is likely to slow sharply — indeed, that the age of growth that began in the 18th century may well be drawing to an end.

Mr. Gordon points out that long-term economic growth hasn’t been a steady process; it has been driven by several discrete “industrial revolutions,” each based on a particular set of technologies. The first industrial revolution, based largely on the steam engine, drove growth in the late-18th and early-19th centuries. The second, made possible, in large part, by the application of science to technologies such as electrification, internal combustion and chemical engineering, began circa 1870 and drove growth into the 1960s. The third, centered around information technology, defines our current era.

And, as Mr. Gordon correctly notes, the payoffs so far to the third industrial revolution, while real, have been far smaller than those to the second. Electrification, for example, was a much bigger deal than the Internet.

Gordon notes that his paper focuses on the United States. Clearly some regions of the world are a century or more behind the "technological curve", not having achieved electrification, indoor plumbing, nor even railroad or automobile transportation. (Here is a link to the Robert Gordon paper.)

It seems to me that the "industrial revolutions" have been driven by clusters of technological changes.

The original industrial revolution from 1750 to 1830 included the steam engine, its application to transportation in railroads and steam ships (and thus an expansion of markets), and the development of the American System of Manufacturing (interchangable parts) the mechanization of textile manufacturing, as well as a change from wood to coal as a fuel and increases in the mining and manufacturing of metals.

We now seem to be in a third industrial revolution, sometimes called the Information Revolution, and I think we are far from seeing it end. It has already seen widespread economic application of advanced in semiconductor, computer, satellite and laser-fiber optics technologies.

I suspect that if other technologies are added to the mix they will come from the sciences. Some possibilities are:

Biotechnology built around the application of modern genetics to agriculture, health and industry

Materials technologies, especially nanotechnology

Applications of neuro-science, in areas such as education and medicine

Applications of cognitive science both in humans and machines.

The final paragraph of the summary of Gordon's paper is disturbing:

Even if innovation were to continue into the future at the rate of the two decades before 2007, the U.S. faces six headwinds that are in the process of dragging long-term growth to half or less of the 1.9 percent annual rate experienced between 1860 and 2007. These include demography, education, inequality, globalization, energy/environment, and the overhang of consumer and government debt. A provocative “exercise in subtraction” suggests that future growth in consumption per capita for the bottom 99 percent of the income distribution could fall below 0.5 percent per year for an extended period of decades.

Friday, December 28, 2012

There seems to be a general feeling that people who work for the government are bureaucrats who are a burden on the economy. I suppose that most people would feel that the Navy Seals that went into Pakistan and took our Osama Bin Laden were not overpaid or doing an unnecessary job.

How about Anthony Fauci, the head of the National Institute of Allergy and Infectious Diseases? Obviously he could head the research branch of any of the major drug companies, run a major hospital or medical school -- all of which would no doubt pay him more than his current salary. He has led a major effort to develop medical approaches to HIV/AIDS. When the next flu variety arrives capable of causing a global pandemic, and such a variety will surely arrive, our safety will depend in significant part on the work done under his leadership at NIAID. I could go on about the achievements of NIAID under Fauci's 28 years as its head, but you get the idea.

How about the work of DARPA in leading the development of the Internet, or that of the NSF in managing the transition of the Internet to serve the private sector? Or the work of NASA and the DoD developing satellite communications and satellite remote sensing. If you don't make overseas calls you may not realize how good and cheap the telephone connections are, but the businesses that depend on international phone and Internet connectivity do. I am old enough to recall how much better our weather forecasts are than they used to be -- improvements due to efforts of the weather bureau, drawing on remote sensing and computer advances that the government has stimulated and funded. Farmers can tell you about the economic benefits of those weather forecasts.

The salary of an employee is presumably determined by the labor market, and the supply and demand for employees with specific skills. Students graduating from college with systems engineering degrees make more money than those graduating with biology degrees because employers are willing to pay more for the computer types and they can find well paying jobs. Of course, employers must expect to make enough money from an employee's services to pay him and also have a profit consonant with investment (albeit with a new grad, there may be a time delay in the returns).

The ratio of average salary in the first working year to average tuition and fees in the final year of college should be considered carefully. It is likely that the higher the initial salary of the average college graduate in a given field, the higher will be the present value of the average lifetime earnings. It is also the case that a student must live while going to college, so fees and tuition are only part of the cost. There are also "costs" of foregone earnings, assuming that the student could get a full time job if not going to school. Nonetheless, it seems likely that it is a much better investment for a student to get a degree in systems analysis or engineering rather than one in Black studies, Art of Anthropology.

I have always been concerned that the income of the graduate is a poor indicator of the social value of the college degree. How much do people gain from the services of a minister, a nurse, or teacher, and how much of that benefit is appropriated by the provider of the service in terms of salary? How much benefit comes to a community that has well run churches, well run hospitals and well runs schools that is not captured in the salaries of ministers, nurses and teachers? We need measures of such externalities if we are to make good decisions on the funding of public education. It may be that the total social value of the systems analysts and engineers is greater than that of the lower paid professionals, but that is not necessarily so.

Sunday, December 23, 2012

Immigrants with university education seem likely to help the economy. The United States has a higher proportion of such immigrants than the OECD average, but a lower proportion than other English speaking OECD countries. Maybe the Congress should change our immigration policies.

Friday, December 21, 2012

The industries producing long guns and hand guns and their ammunition had a military market in the United States. They also had an international market. It has been estimated that there are 300 million guns in civilian hands, so they clearly found a domestic civilian market. I quote from a 2005 study based on a telephone survey:

Thirty-nine percent of households and 28% of individuals reported owning at least one firearm. The majority of firearm owners own more than one firearm, with 60% owning three or more. Over 50% of firearm owners own both a handgun and long gun, but long guns represent 62% of the privately held gun stock. Men more frequently reported firearm ownership, with 45% stating they personally owned at least one firearm, compared to 11% for women. Respondents who had served in the military or had grown up with a firearm in their home were significantly more likely than those who had not to report owning a firearm. The most common reason for owning a handgun was self-defense. Long guns were primarily owned for hunting and sport shooting. Conclusions: Firearm ownership is widespread in the United States with over 60 million adults owning at least one firearm. Among firearm owners, however, ownership appears to be concentrated with 20% of firearm owners owning more than 60% of the firearms.

A market of that size clearly attracted the American advertising industry, and one can assume that gun advertising also influenced the American myths about guns. Think of the Ted Williams Model 200 Sears & Roebuck 12 guage shotgun sold at the height of the baseball player's fame, and marketed via the national catalog and the Sears stores. We also have gun shows and a national wholesale and retail distribution system for civilian firearms. There are firearms museums and collectors, again contributing to a public view that guns are interesting, worth owning.

One element of the gun culture is that there is a strong market in used guns. They are indeed "consumer durables". Thus one can buy guns and not lose too much of their value if one resells that gun later.

The U.S. military during all of the 20th century sought to stimulate civilian marksmanship. I suppose that the idea was something like that of that in Medieval England in which yeomen were required to practice their skills with the longbow. A population that used guns expertly would perhaps be more effective in the soldiers it produced. Sargent York, the backwoods marksman who became the most decorated soldier of World War I, not only demonstrated the value of marksmanship but provided great publicity for the military when it was much desired. In any case, the army sponsored rifle and pistol competitions and encouraged soldiers to enter international competitions.

All of this led to wide spread gun ownership, especially among men who can easily afford what is a fairly significant cost. One wonders, however, how many of the men who buy handguns for "self defense" really understand what they are doing. Do they know how dangerous it is to confront an armed criminal with a firearm? Do they realize what it would feel like for a normal person to kill another person "close up and personal" with a hand gun?

Fortunately, there are relatively few assault weapons in the United States. Here is one estimate:

A November 2012 Congressional Research Service report found that, as of 2009, there were approximately 310 million firearms in the United States: “114 million handguns, 110 million rifles, and 86 million shotguns.” However, author William J. Krouse went on to note that “data are not available on the number of ‘assault weapons’ in private possession or available for sale, but one study estimated that 1.5 million assault weapons were privately owned in 1994.”

Even if that number has increased in the last couple of decades, it should be possible to control their number and distribution.

I am no expert on the history of firearms, but I thought I might share some of my thoughts.

At the time of the revolutionary war, firearms would have been very expensive in North America. I don't suppose there was much use for pistols, which would have been expensive and of little or no use at any distance -- some rich men might own them for duels, and I suppose the few people who carried money might have carried pistols for protection.

The long guns, muskets, would have been expensive since there was little ability to manufacture their parts in the colonies. They would have been inaccurate. Powder would presumably been hard to find and expensive, as would lead for bullets. Loading a musket and keeping powder dry would have taken time and effort.

Apparently rifles became important rather than smooth bore long guns as Americans moved west in the 19th century, but there were also shotguns in use at the time. Flintlock actions and percussion caps were becoming common.

The myths around Daniel Boone (18th century) and Davy Crockett (19th century "King of the Wild Frontier") were around for a long time, but probably became much more common in the days of television and movies.

The Civil War brought minie balls, repeating rifles and revolvers and cartridges into wide spread use in the military, but perhaps most important, resulted in large scale manufacturing of firearms in the United States. While the American System of Manufacturing had long before brought interchangeable parts to the manufacture of firearms here, at the beginning of the war there were few places capable of manufacturing firearms in the United States, and the maximum production of any of these was some 15,000 weapons per year. In the Civil War guns were manufactured by the million.

The 1873 Colt Peacemaker 45

During the Civil War the transcontinental railroad was approved. Prior to the war, Texas had been added to the United States, as had the Southwestern lands taken from Mexico. The Gold Rush had taken place in California, and the Comstock Load of Silver had been found in Nevada. From 1865 to 1900 there was a mass movement into the western United States, marked by the Indian Wars, the cattle drives, the destruction of the buffalo herds, and the spread of rifle and pistol cultures into the west.

It was also the time of the dime novels. Buffalo Bill and other Wild West shows. Improved printing presses, mass distribution via railroads, and a literate public resulted in a mass market. The myths of the western gun culture went into mass production.

The western movie was popular during the silent era and reached huge audiences with the talkies. During the Great Depression the movies were an affordable mass entertainment, and many of the movies were westerns. The radio brought kids the Lone Ranger and Gunsmoke.

Television in the post World War II years brought us Gunsmoke, Bonanza, the Rifleman, Have Gun Will Travel, and many other westerns, and brought them into the living room. A whole generation had the myths of American gun culture brought into their living rooms.

But we also saw war movies in the aftermath of both world wars. Police procedurals, hard boiled detective stories and other shoot-em-ups were also popular.

It seems to me that our mass media have done a great deal to create and promote a gun culture.

The large numbers of uses of firearms in crimes are not well publicized. There are so many murders and suicides using firearms per year that they are not really news. It is only the mass murders that draw extreme media attention.

The polls suggest that most people feel that gun ownership is appropriate in our culture, and that there is no reason that many people should not be allowed to own guns. They believe however that guns should be regulated and registered. Efforts should be taken to keep people with criminal records and mentally disturbed people from obtaining or having guns. Moreover, there seems to be considerable support to keep some kinds of guns off the market -- the so called Saturday night specials, assault weapons, machine guns, etc.

The book focuses on the colonial loyalists who sided with Britain in the American Revolution. The discussion brought out the fact that the Revolution was a rather brutal civil war North America. Revolutionaries demanded oaths of loyalty to the revolution, mobs used tar and feathers (in one case mentioned in the book lighting the tar thereby causing permanent disability). One must assume old grudges were settled violently on both sides. Property of loyalists was expropriated by the revolutionaries. Thousands of British loyalists were driven into New York, Charleston and other cities held by the the British forces.

American history as taught in the schools emphasizes that the British troops included not only people from the British Isles, but German military unites rented for the war by the British government. The book notes that there were also American loyalist units. There were Creek and Iroquois Indians fighting on the British side as there were Indians fighting with the revolutionaries. As the American revolutionaries successfully resisted defeat by the British, the French and Spanish eventually joined in war against Britain.

When the war ended there were many loyalist who went into exile. They included English loyalists, Mohawks, and freed Blacks. In addition, many loyalist slave owners took their slaves with them. Jasanoff believes that an estimate of 75,000 refugees may be justified by the existing records. (I wonder whether some uncounted loyalists took refuge to the western wilderness, including Indian refugees. Might others have sought refuge before, during or after the war by simply leaving for Europe, the Caribbean, or Spanish America?)

The largest portion went to what is now Canada. the Mohawks established themselves as part of the Canadian Iroquois community and their leader Joseph Brandt is now considered a Canadian hero. The Whites significantly increased the White population of Canada and eventually used their political power to reduce the liberties that had earlier been given the French Canadians by the British Parliament.

The British in Canada were overwhelmed by the needs of feeding and housing the refugees, whose number was large with respect to the existing population of European-Canadian residents. The promises made to the refugees were not (perhaps could not be) fulfilled. There were also what now appear to be inequities. The Blank freemen were provided smaller land grants than their White counterparts, and aristocrats were better treated than commoners. There was a riot in which the White refugees drove Black refugees out of their separate settlement burning their huts.

Some of the loyalists returned to England, and they and their descendants in some cases moved on to other parts of the empire. The British broke new ground by initiating a policy of reimbursing loyalists who had property confiscated by the revolutionary United States. A commission was created to record claims and where possible to substantiate them. Pensions were provided to some refugees, large for the formerly rich, small for the poor. Eventually many refugees received reimbursements for their losses. Of course the well connected aristocrats did better than others.

Some refugees were sent to east Florida. We had recently read The March of Folly: From Troy to Vietnam by Barbara W. Tuchman. Tuchman devoted a section of that book to the follies of the British government that led to the American revolution and to its success. This book suggested the follies continued. Thus the British ceded Florida to the Spanish in the treaty ending the war. The Spanish announced that the British loyalist refugees could stay if they became Catholics and swore loyalty to the Spanish king, but many refused and had again to emigrate as refugees.

Many refugees went to British colonial Islands: Jamaica, Barbados and the Bahamas. The book points out that the Bahamas to the east of Florida and in the Gulf Stream are quite different ecologically than the Caribbean Islands. The plantation culture in the Caribbean Islands was economically very successful. The refugee loyalists immigrating to the Bahamas were much less successful.

The Bahamian story is again a march of follies. An American revolutionary force invaded, meeting little and ineffectual resistance by local militias, and then withdrew. The Spanish then took Nassau, and were in turn defeated by a tiny force of irregular American loyalists from Florida, discovering only later that the Spanish had ceded the Islands to Britain in the 1783 treaty ending the war.

The British offered freedom to any slaves who escaped their masters and joined the British military forces. When after the war, Washington and other slave owners demanded the return of their escaped slaves, the British responded that their honor demanded that the promises made to those Black now be kept. Thus a relatively large number of freed Blacks were among the refugees. Some of these eventually helped found Sierra Leon as a state for freed former slaves and their descendants. However, there were also slaves who were taken as property by white loyalists refugees. One of these was instrumental in a slave revolt in the 19th century in the Bahamas. (The willingness of slaves to take up arms against their masters shown in these times must have fueled the fear of slave revolts long after in the South.)

The loss of the North American colonies was a blow to the self image of the British and the government officials who were responsible were quickly replaced. The new cabinet apparently learned many lessons from the experience, and colonial administration was improved. Britain, of course, went on to rule the Indian subcontinent for a century and a half. It colonized much of Africa. It also revised its colonial administration of Canada, Australia and New Zealand. (One of the odd stories told in the book is that an American loyalist refugee in England advanced a plan to settle a community of his fellows in Australia, but revised that plan to substitute prisoners from the overcrowded prisons of the British Islands. That plan was accepted, leading to a history told in another book read in the past by the club -- The Fatal Shore: The Epic of Australia's Founding by Robert Hughes,

We have become inured to the suffering of millions of refugees from wars and their aftermaths, especially for the club members old enough to recall the aftermath of World War II. That in no way reduces the fact that there was great suffering among the loyalist refugees of the Revolutionary War. Many were forced out of their homes, lived with difficulty in overcrowded and poorly supplied towns held by the British during the war, and then were exiled. One of the lessons of the book was that the rich and aristocratic survived much better as refugee loyalists than the poor -- no surprise that.

Fifteen club members showed up for the discussion, not all of whom had been read the book. None the less, the discussion was lively. It appeared that those who had read the book found it interesting and well written.

Jasanoff had broken new ground in her exhaustive research for the books, since she was able to search materials located in the many countries that had received the refugees. She was able to use records from the British government of the transport of the refugees, their resettlement, and the reparations committee. Refugee families were separated in the aftermath of the war, as were people with long established friendships, and some the correspondence among these people survives and was used in the research. Thus the author was able to draw on first hand accounts of the lives and feelings of the refugees.

There was strong agreement among club members that the book explained aspects of the Revolution we had not recognized, and explained them well.

In a culture where being social and outgoing are prized above all else, it can be difficult, even shameful, to be an introvert. But, as Susan Cain argues in this talk, introverts bring extraordinary talents and abilities to the world, and should be encouraged and celebrated.
This is part of my series suggesting that we think with our brains, not our minds. Introversion or extroversion does not seem to be a choice, but it does influence what we think.

First focus on the orange line representing spending by the federal government and the brown line representing government revenue (left hand axis). The graph begins in 1980, the last year of the Democratic Carter administration. (Note that the budget for the year following the end of an administration is determined during that administration.) The spending exceeded income from 1980 to 1996. It was only during a brief period of Clinton administration budgets that revenues exceeded spending. The crash in the latter part of the last decade led to a recession and a fiscal stimulus. The reduction of government revenue was in part due to the downturn in the economy and thus in tax revenues, and in part to tax rate cuts intended to stimulate the economy.

The blue lines represent the federal debt as a percent of GDP. The Reagan years saw a rapid increase in this ratio, and the Clinton administration saw it reduced. The second Bush administration reversed the downward trend, but it increased rapidly since the financial crisis during the Great Recession. The real problem is that it is projected to continue increasing in the future unless federal government policies change.

We want those lines to come closer together in the future, perhaps to touch or even to cross. Thus we might think of government running at say 25% of GDP, with both revenue and spending at that level. In good times we might expect revenue to be larger with respect to spending, and in bad times stimulus might lead to spending exceeding revenues.

Solutions

Part of the solution should be to grow the economy. As the GDP increases, the ratio of the debt to GDP should tend to decrease. If the nation goes over the fiscal cliff, it is likely to return to recession (probably pulling Mexico and Canada with it, and perhaps the world). Thus many economists recommend that efforts to reduce the deficit not be too draconian.

Government revenues can be increased by increasing the taxes, and most Americans believe that they should be increased for upper income tax payers. That can be accomplished increasing the rates on high incomes. It can also be increased by increasing the contributions of high income tax payers on social security. Alternatively, revenues can be increased by closing tax loopholes and reducing tax exemptions, as was done in the Reagan administration. For example, the maximum deduction for interest might be limited to say $5000 (corresponding to 5% interest on $100,000 debt). It seems to me that reducing deductions would be good policy since the tax breaks on expensive home mortgages helped fuel the housing bubble -- one of the causes of the crash; tax breaks on credit card debt helped to fuel the excessive personal debt created in the last decade.

The following graph is also from the article in The Economist:

The U.S. Defense budget is comparable to that of the next 17 largest national military budgets combined. With the end of the wars in Iraq and Afghanistan, we should be able to reduce defense spending. That will help, but not be a big part of the reduction we hope for.

We can decrease entitlement spending, and certainly decrease the growth in entitlement spending. Some reduction has been included in the Obama health care legislation by making health care more efficient. Some could be accomplished by increasing the age at which social security and medicare kick in.

I would guess that interest rates will go up, and thus net interest on the increasing national debt will also increase.

That leaves the "other" spending on the graph, the so called discretionary spending on things like the national highway system, science and technology and education. Much of this spending contributes importantly to the long term growth of the GDP. Moreover, in total that discretionary spending amounts to less than 5% of the GDP. Not much blood can be squeezed from that stone, but we should try to make some cuts.

The division lines between religions seem to be a source of conflict. That between Muslim north Africa and Christian south Africa is in the news, and we know about that between Muslim Pakistan and Hindu India. Obviously that between the Muslim world and Christian Europe and Russia has been historically important. There are other such boundaries.

Monday, December 17, 2012

I spent years on my high school rifle team, and indeed was once on the Los Angeles high school rifle team. I enjoyed trap shooting for years. I hunted. Like most Americans I see roles for guns in our society. I also believe that people who wish to own or use guns should be taught to do so safely.

There were 52,447 deliberate and 23,237 accidental non-fatal gunshot injuries in the United States during 2000. The majority of gun-related deaths in the United States are suicides, with 17,352 (55.6%) of the total 31,224 firearm-related deaths in 2007 due to suicide, while 12,632 (40.5%) were homicide deaths.

I find it hard to imagine that anyone would object to government regulating the sale of firearms to prevent defective weapons that might explode being sold to unsuspecting customers. We don't allow civilians to buy functioning machine guns. My point is that clearly there is a role for gun regulation even within the Second Amendment.

Most Americans agree that guns should be registered, that mentally disturbed patients should not own guns, and that criminals should be prevented from using guns. We accept inspection to assure that people do not bring guns into commercial airplanes nor government buildings. My point is that in our democracy, the majority accept the need for serious gun control in some circumstances.

It seems clear to me that 75,000 gunshot injuries and 31,000 firearm related deaths are too many. There are too many horrors like that in Connecticut last week. I expect our Congress to review our gun laws and enact new legislation that will reduce the misuse of firearms. A good place to start would be to restore the law banning the sale to or ownership by citizens of assault weapons.

Sunday, December 16, 2012

National development is about life getting better for the people of a nation. Increase in per capita GDP is an indicator of development, but as Charles Kenny points out in his book Getting Better: Why Global Development Is Succeeding--And How We Can Improve the World Even More it is not the only indicator of development. Life gets better if people are healthier, if they are happier, if they are better educated, if they are less subject to coercion and violence, it they are less often hungry, if they have more choices and better choices available, or in many other ways.

If people keep doing the same thing in the same way, they are unlikely to achieve development. Thus in some fundamental way, development is based on change. Change may, of course, contribute to bettering lives, to making lives worse, or be neutral with respect to the quality of life. It is clear that a change from peace to armed conflict is almost always a step back in terms of national development.

So what kinds of changes contribute to development? Sometimes they are big changes:

The U.S. Revolutionary War replaced foreign monarchy with home rule by elected officials

The U.S. Civil War resulted in the replacement of chattel slavery by free labor

The fall of Communism a couple of decades ago resulted in the replacement of centrally planned economies by market economies.

Sometimes they are smaller. I trained in operations research, which substituted computer based quantitative analysis in decision making for management by intuition; that is a smaller change than those listed above. Many inventions of new products and new processes lead to these smaller changes in the way things are done.

Often, however, a change that appears small at first glance turns out to be very complex. Thus one might think that a farmer could easily adopt a new variety of rice or wheat to grow in his fields. In India, the Green Revolution however required a massive effort to enable millions of farmers to make that choice. The improved varieties from the international agricultural research stations had to be adapted to local conditions. Farmers had to learn how to grow them. Irrigation systems had to be built to provide the water needed to realize the added growth potential of the varieties. Seed distribution systems had to be developed. So too did systems for the dissemination of fertilizers and pesticides to support the use of the new varieties. The wide spread use of monocrops of the new varieties implied a need for new and more effective pest and disease surveillance systems, as well as the continued development of improved varieties.

In order to be willing to change, people must think that they have the potential to gain from the change. In the kleptomacies found in many developing countries, others may steal the added benefits that would result from any innovation thus blocking innovation. So too, the potential benefits must be seen to outweigh the risks. A poor farmer living on the edge of subsistence might not be willing to try a new crop variety for if it failed it might mean starvation and death for members of his family. Obviously those with more resources are more able to risk failure of a specific innovation; those from supportive communities may be able to depend on help from friends and neighbors if an experiment goes wrong.

It also seems clear to me that political change, even though it is promoted by people in the hope of things getting better, is not enough per se to make things better, at least not in the short run. Replacing one set of politicians who are not doing well for a nation with another no better set is unlikely to help the nation. Even when the new group is better, it may take years for the changes that they introduce to produce improvements.

I think that help from a nation's friends also pays dividends on a national scale. The South Korean economic miracle benefited from U.S. and Japanese support; the Israeli economic miracle also benefited from support from the USA and Europe; the Asian Tigers benefited from Japanese subcontracting; the Celtic Tiger, benefited from EU support and access to EU markets, as well as from Ireland's close cultural ties with the USA.

Geography matters. Countries with valuable natural resources have an advantage. Given the importance of water transport, landlocked countries are often at a disadvantage. Tropical countries, with populations subject to major tropical disease problems are at a disadvantage unless and until those diseases can be controlled or eradicated.

As pointed out in my previous post, sometimes doing things better adds to GDP and sometimes it does not. When smallpox was eradicated, a lot of work was avoided in vaccinating people, in assuring that people entering the country were vaccinated, and in treating people who got sick from the disease. The Gross Domestic Product was reduced by the value of the goods and services that no longer had to be expended on smallpox. Providing good text books for schools rather than bad ones is likely to benefit the students but not change the costs of books to the schools.

However, it is useful to use growth in GDP per person as a surrogate for development because it is so often enables people to have better lives. In order to increase the GDP per person, more goods and services must be produced per person. There are a lot of well known ways to do this:

More people can be put to work. This can happen by decreasing unemployment, putting more people into the work force, etc.

People can work more, for example by decreasing under employment.

People can work better, for example by being in better health and thus able to work harder or by being smarter, better trained or better educated.

People can have more and better tools and technology with which to work.

The organization of work can be improved, by improving the operation at the workplace, by improving the functioning of the organizations in which people work, by improving the input and output markets for their enterprises, etc.

It seems clear that good policies and good institutions support those improvements.

(I)n the world of informal learning—where most of us live during most of the day for most of our lives......Let me propose an "Informal Learning Core." ........it has three pillars: the learner, the mentor, and the materials.

I think simple visual aids can be helpful, but we should recognize them as simplifications of the real world.

It seems to me that in the informal world we learn a lot from our peers, or even from others that we come into contact with only briefly. Thus the apex of Reich's triangle might be expanded to reflect the social networks of the learner(s).

I wonder about the term "mentors". I tend to reserve that term for people who in fact accept a role of helping another person to learn. But one often learns a lot from one's boss or one's clients -- people who help one to learn incidentally to accomplishing other purposes. Thus the "mentor" vertex might be shown also as including social networks.

In the context of "technology-based informal learning", it might be worthwhile to disaggregate "materials" into several categories, including "media" explicitly. In the informal world we learn from books, the Internet, television, radio, clubs, and other sources.

As the world changes more and more quickly, and as more and more of routine work is automated, it is important that we learn more and more outside of schools and as adults. So too, as the world get "flatter" and smaller, and as our roles as citizens and consumers become more and more demanding, it is also that we learn more and more outside schools and as adults. Technology-based informal learning already has a large role in our world, and that role should be increasing.

There is a good article on the Marshall Plan in Wikipedia. It points out that the United States provided $26 billion in aid to Europe between the end of World War II and the end of the Marshall Plan. Aid was offered to the European nations involved in the war and Turkey, but was not accepted by the Communist block.

The U.S. GDP was $258 billion in 1948. Moreover, the United States itself had a need for domestic investment which had been low during the Depression and which had been devoted to military development during the war.

By 1952 as the funding ended, the economy of every participant state had surpassed pre-war levels; for all Marshall Plan recipients, output in 1951 was at least 35% higher than in 1938.

Of course, the credit for rebuilding the productive capacity of these countries must be given to their own citizens. The U.S. aid to Europe over seven years clearly helped overcome some of the blockages to economic development. Indeed, development economists assumed after World War II that the pace of economic development could be similarly increased in other regions simply by providing financial assistance which would be used to increase capital accumulation and thus productivity. Decades of experience have shown that that is sometimes true, but unfortunately often foreign aid does not lead to economic growth.

Still, it is worth recalling that the United States provided large amounts of financial assistance after the war not only to our allies, but also to Germany, Italy and Japan -- our enemies in the war. It is also worth recalling that those countries became and remain today our allies.

Thursday, December 13, 2012

Wednesday, December 12, 2012

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Girl Rising is the feature-length film at the center of 10×10's global action campaign for girls' education. The film reveals the extraordinary stories of girls from around the globe, fighting to overcome impossible odds on the road to realizing their dreams of education. Coming Spring 2013.
"Shake It Out" by Florence and the Machine.

Saturday, December 08, 2012

When one sees discussions of innovation they seem usually to be focused on those which will lead to increases in GDP. Sometimes these days innovation is proposed as creating industries that will increase employment. This is true even though many of the innovations in U.S. manufacturing have been those which increase labor productivity, keeping industry internationally competitive but reducing the workforce.

My previous post however focused on innovations that tended actually to both reduce GDP and to reduce employment. Thus, innovations which prevent illness, and thus the demand on palliative and curative health services, tend to reduce health service expenditures and thus the demand for doctors, nurses and other health workers. Similarly, the innovations that increased agricultural productivity often result in lower prices for agricultural products and have seen a great reduction in agricultural employment.

We can suggest simply that the benefits from a technological innovation may be appropriated by the suppliers of capital, by workers, or by consumers. Not surprisingly there is a considerable political interest in funding the National Institutes of Health, not only because its research is likely eventually to benefit the pharmaceutical industry, but because it is likely to benefit patients. Indeed, were we to make the argument that NIH funding would be justified because they would increase the size of our health service industry and create more demand for doctors and nurses, we would be likely to see Congress quite concerned.

In a larger sense, government investment in the fundamental research that is likely to produce future technological innovations should be considered in terms of the benefits to all three -- consumers, workers and investors. Indeed, there might be a larger role for government in promoting innovations that benefit people while reducing labor and GDP.

Today the Department of Defence has over 6,000 UAVs, including hundreds based on the Predator. Predators have been used by America in every conflict since the Balkans, including Afghanistan, Iraq, Yemen, Somalia and Libya, and have collectively logged millions of flight hours. America’s armed forces plan to spend $37 billion on UAVs in the next decade, increasing their number to more than 8,000.

I suspect that this is another example of American military expenditures driving the development of a technology that will have important spin offs in civilian life.

And from another article:

For small items that are needed urgently, such as medicines, why not use drone helicopters to deliver them, bypassing the need for roads altogether?

That, at least, was the idea cooked up last year at Singularity University, a Silicon Valley summer school where eager entrepreneurs gather in the hope of solving humanity’s grandest challenges with new technologies. The plan is to build a network of autonomously controlled, multi-rotor unmanned aerial vehicles (UAVs) to carry small packages of a standardised size. Rather than having a drone carry each package directly from sender to recipient, which could involve a long journey beyond the drone’s flying range, the idea is to build a network of base stations, each no more than 10km (6 miles) from the next, with drones carrying packages between them.

After arrival at a station, a drone would swap its depleted battery pack for a fully charged one before proceeding to the next station. The routing of drones and the allocation of specific packages to specific drones would all be handled automatically, and deliveries would thus be possible over a wide area using a series of hops. It is, in short, a physical implementation of the “packet switching” model that directs data across the internet, which is why its creators call their scheme the “matternet”.

Here we have some thinking about the use of small drones as an appropriate, transformative technology for developing countries. I don't know if this approach will serve to replace roads, or indeed trails. In developing countries wages are low and people can go almost anywhere with motor bikes.

I do suppose that there will be major civilian applications for UAVs, and that they will serve some important functions in poor countries or poor areas of developing nations.

I just started reading Getting Better: Why Global Development Is Succeeding--And How We Can Improve the World Even More by my friend Charles Kenny. He points out that the estimated incomes for English working class 600 years ago is roughly similar to that of the Indian poor today. He also points out the difficulty of comparing Gross Domestic Product (GDP) estimates across time and across countries. Finally, he stresses that technology improvement has improved the quality of life for the poor in developing countries in ways that don't show up in income estimates. It occurred to me to post on some of the differences between a typical rural family in England six centuries ago and one in India today.

Health: Actually neither would see a doctor often if at all. For the English family, that would be all to the good because seeing a doctor 600 years ago would have been more likely to harm than help the patient. The Indian family will not worry about smallpox nor plague since they have been banished from modern medicine, while the English 600 years ago would have had a right to be very concerned. In the past diphtheria, whooping cough, tetanus, measles and mumps were serious problems causing a lot of sickness and death, but are largely absent today since they are prevented by routine immunization. Protection could not have been purchased by our English family and would be free to our Indian. Malaria was common in much of the south and south-west of England 600 years ago, but has been controlled in India. The result of the changes in technology mean that the Indian children will be much more likely to survive to become adults, the adults to live longer, and all at little or no cost to the family.

Family Planning: Condoms, birth control pills, IUDs, vasectomy and tubal ligation have all been invented in the last century. The medieval English family would have had few options but having large numbers of children, many of whom would not survive. The Indian family has many options, and with the knowledge that most of their children will survive, will have fewer children. Contraception will probably be inexpensive, probably subsidized for the poor.

Schooling: Most English poor children would not have gone to school six centuries ago. Most Indian children will benefit from primary school since schools are available, their costs subsidized, and since families have incentives to educate their children and fewer children to educate.

Food: In the last 600 years many food crops once confined to single areas have spread across the world, and improved varieties have been developed and widely disseminated by modern research. The Green Revolution was especially successful in India, combining improved varieties, irrigation and chemicals. The English farmer six centuries ago was living on the edge of famine, while agricultural productivity has increased significantly in India. The Indian farm family today not only feeds itself, but provides a surplus to help feed the increasing urban population. Still, much of its production may never enter the market, being consumed in the local community.

A farmer inspecting a field on the outskirts of Bhubaneswar, Orissa.

Clothing: Neither the English nor the India family would have an extensive wardrobe. The midieval English family would have found clothing very expensive. Modern agriculture has made vegetable and animal fiber more efficient of land and labor, and chemistry has produced low cost artificial fibers. The Industrial Revolution dramatically reduced the labor required in weaving, and even clothing production is more efficient due to machinery. Indeed the distribution and marketing of clothing is miles more efficient today than that in medieval England.

Housing: The poor in medieval England and modern India both would live in very modest housing. The Indian would benefit as compared with the Brit from a relatively mild climate.

Transportation: The rural poor in medieval England would have walked. They would not have spent money on transportation, but would not have had access to services or markets at any distance. Rural India may not be well supplied with means of transportation by the standards of rich countries, but would have immeasurably better access than his medieval British counterpart. As a result the Indian would have many more cost effective alternatives seek services and buy and sell goods using the modern system of transportation.

Information: Radio is ubiquitous in India today, mobile telephones are reaching the villages, and television too. Indeed, in many areas of India there are Internet facilities available at the village level.

Lighting: While an estimated 400 million Indians still don't have electrical power, some 800 million do. Electric light lengthens the day, and of course electrical power provides convenient inexpensive power for many other purposes. Lighting a midieval rural home was difficult and expensive, not much done.

The end result of the massive technological change over the centuries is that rural Indian families today are in many ways better off than their medieval English counterparts, even if the improvements do not show up in their estimated monetary income.

It is important to understand this quotation. Darwin was not opposed to evolution, and indeed saw it as a process in which new species arose to replace former ones because they were better adapted to survive in a changing world.

Think of a species as a means for its genes to survive. In that model, evolution is a process by which a collaboration of genes survives by deleting some of its members and replacing them with others so that the new collaboration is more successful than the old.

Many people want cultures to survive. If we think of a culture as a collaboration of memes, perhaps cultures should be seen as evolving by deleting some of its memes and replacing them with others so that the new cultural collaboration of memes is more successful than the old.

The evolution of species has generally been unplanned, except in the rare circumstances of human selection. Farmers over thousands of years have conducted selective breeding to produce new varieties that better meet human needs. In some cases they have produced new species through that process rather than just varieties of existing species.

Cultural evolution too is often unplanned. However, there are examples in which people have thoughtfully guided their own evolution.

The Japanese seem to have been exceptionally successful in guiding their culture's evolution to eliminate memes that were unproductive, to adopt new memes that would be more productive, and to retain still other (highly valued) memes. Under the Tokugawa Shogunate Japanese gave up the production of firearms and ammunition, which had been a part of Japanese culture since the 13th century and widely used in the warring states period, but also closed Japan's borders to protect Japanese culture from other foreign insertions. After the Meiji Restoration in 1868, Japanese rapidly adopted military and industrial technology from the west, while reverting to political systems likened to earlier imperial models. After World War II, Japanese deliberately moved away from the militarism that had marked previous decades while embracing democratic governance. It rapidly developed modern automotive and electronics industries, while explicitly preserving traditional practices from Kabuki to Sumo.

Thursday, December 06, 2012

A student in last night's session of the GWU UNESCO seminar spoke on lifelong learning. I am old enough that my time in primary and secondary school are actually a small portion of my life, even adding four years undergraduate work. Even in those years I learned a lot reading and just living. Had I stopped learning at that point I would not have had nearly as interesting a life.

Some 60 million primary school age children are out of school, and 47 percent of those will never go to school.

In 123 low and lower middle income countries, one fifth of young adults have not completed primary school.

Some 775 million adults are illiterate (probably more if literacy were defined as able to read adequately to work in modern industries).

If people stop learning when they are out of school, the world is in real trouble. Of course, a lot of learning any child does occurs out of school. One supposes that the less schooling children receive, the more they learn through informal means; daughters from their mothers, future farmers from adult farmers, future market stall operators from current ones.

Still I suspect that the pace of cultural change is increasing. There continues to be rapid urbanization, and the lessons learned in the rural areas will be less applicable in the city. Economic growth means that productivity increases, and that further implies that people work differently -- at different jobs or with different equipment and materials in their changing jobs. They will face different foods, different health challenges and opportunities, and different roles as citizens, neighbors, and family members. Thus there should be more and more learning required in the future, and much of that learning would be required out of school.

UNESCO has been carrying out a number of roles with regard to EFA. It sponsored the meetings at which the benchmarks for EFA were defined. It pioneered in the kinds of educational planning that would be required to achieve the benchmarks in early childhood welfare and primary schooling. It helped member states to develop the statistics to measure progress, and has used its convening power to organize meetings of educational officials and experts to monitor progress, and it has produced the annual EFA Global Monitoring Reports.

UNESCO has been less active with respect to livelong learning. It does have an Institute for Lifelong Learning, but does not carry out nearly as vigorous a program there as it does on schooling and especially schooling at the primary level.

UNESCO might be very useful as a forum for discussion of lifelong learning, as a clearinghouse for ideas, and as a laboratory for expression of ideas on the topic. It seems likely to me that governments will wish to take a more active role in the near future in promoting lifelong learning for their citizens. It may well be that after 2015 UNESCO can help those governments as it began to help governments in 1990 to implement EFA.

I gather that there are skeptics of the value of such international study, especially of that in non-traditional sites. I was thinking of the utility of study arranged around the nearly 1000 UNESCO World Heritage sites. It seems clear to me that study in these sites could be very appropriate for students in many fields.

Students of foreign languages could obviously benefit from work in the sites in countries where the language was native. Thus students of Spanish could benefit from properly organized visits to World Heritage sites in Spain. But might they not also benefit from learning about the 500 year old heritage of the Spanish culture in Mexico or Peru?

Students of classical civilization clearly would benefit from study of World Heritage sites in Italy, Greece or Egypt, but might they not also benefit from study in China or India?

Tuesday, December 04, 2012

Although terrorist attacks are distributed widely around the world, the majority are concentrated in just a handful of countries. Iraq ranks first based on a five-year weighted average of the number of incidents, deaths, injuries and estimated property damage. But while the number of incidents there have climbed since 2007, deaths have actually declined. Today’s chart maps terrorist attacks around the world. View chart: http://econ.st/Sv0OZz

"Booming cities will be good for Africa’s construction sector. Ambitious new city projects like EkoAtlantic in Lagos and Tatu City in Nairobi will be welcomed by a middle class tired of traffic jams, power cuts and insecurity. Such projects are likely to make money, but they will contribute little to giving the poor a sense of ownership of their cities. It is unclear how jobs will be created in cities that have little industry. Innovative services on African mobile phones will win praise in Silicon Valley in 2013, but software can do only so much. Look down the list of growing cities and a host of little-known places like Huambo, Mbuji-Mayi and Mbeya will be expected to serve populations the size of Milan’s—with little infrastructure."The standard view of cities as generators of wealth, diversity and ideas will be challenged in Africa. The exclusion of the poor will be magnified by a lack of public space and by rising living costs. To become liveable, cities will have to improve public transport. Many are trying, but safety will be a challenge: murder, and violent carjackings and robberies, will rise in many cities in 2013, sometimes with police involvement."Did you know that:

The population of Khartoum is more than twice that of Amsterdam;

The population of Luanda is more that four times the population of Geneva and its surrounding area.

"Small economies dominate the top ten. Half of these are European, but only one, the Netherlands, is from the euro zone. The Nordic countries shine, whereas the crisis-ridden south of Europe (Greece, Portugal and Spain) lags behind despite the advantage of a favourable climate. The largest European economies (Germany, France and Britain) do not do particularly well."America, where babies will inherit the large debts of the boomer generation, languishes back in 16th place. Despite their economic dynamism, none of the BRIC countries (Brazil, Russia, India and China) scores impressively. Among the 80 countries covered, Nigeria comes last: it is the worst place for a baby to enter the world in 2013."